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Chinese Chipmaker SMIC Denies Military Ties as US Considers Imposing Export Controls

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By Associated Press | Updated: 7 September 2020

China’s leading maker of semiconductors has denied it has any links to the military following reports Washington is considering stepping up its feud with Beijing over technology and security by imposing export controls that could disrupt manufacturing for a national industrial champion.

US regulators are considering adding Semiconductor Manufacturing International (SMIC) to a list of foreign buyers that need government permission to acquire technology or components, according to The Wall Street Journal and other outlets. They said officials are looking at whether SMIC plays a role in Chinese military development.

“We have no relationship with the Chinese military,” the company said in a statement. It said SMIC products are “solely for civilian and commercial end-users and end-uses.”

The company said it is “open to sincere and transparent communication” with Washington to resolve “potential misunderstandings.”

SMIC is a leader in a semiconductor industry built up by the ruling Communist Party in an effort to reduce China’s reliance on foreign technology.

The Trump administration is trying block Chinese access to US technology it worries might be used to make weapons or develop competitors to American industry.

The US-Chinese tariff war that erupted in 2018 was sparked in part by Washington’s complaints about Beijing’s technology ambitions. The United States and other governments complain Chinese development plans are based on stealing or pressuring foreign companies to hand over technology.

Washington also worries about China’s development of long-range missiles, supercomputers that can be used in nuclear warhead development and other high-tech weapons. That comes amid tension over control of the South China Sea and other territorial disputes.

Washington has imposed similar curbs on access to US process chips and other components for China’s first global tech competitor, Huawei, one of the biggest makers of smartphones and network equipment. That threatens to cripple Huawei’s business.

Chinese companies including Huawei are developing their own processor chips and other technology. But factories that produce them require American manufacturing technology for which there are few alternatives.

SMIC said it previously was granted “validated end-user status” by the agency that would impose the export controls. Such status allows a Chinese company to export US technology without applying for a license for each shipment.

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China Must Prepare for ‘Long Tech March’ Following US Restrictions on SMIC: State Media

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By Reuters | Updated: 28 September 2020 10:31

China must engage in a new “long march” in the technology sector now that the US has imposed export restrictions on Semiconductor Manufacturing, the country’s largest chip manufacturer, Chinese state-backed tabloid the Global Times wrote on Sunday.

The unnamed author of an op-ed in the paper argues that the US’ dominance of the global semiconductor industry supply chain is a “fundamental threat” to China.

“It now appears that China will need to control all research and production chains of the semiconductor industry, and rid itself of being dependent on the US,” the author wrote.

On Saturday, Reuters reported that the US had sent letters to companies informing them that they must obtain a license to supply SMIC.

The letter stated that SMIC and its subsidiaries “may pose an unacceptable risk of diversion to a military end use.” SMIC has denied any ties to China’s military.

The restrictions against SMIC, and earlier ones against Huawei, the op-ed author argues, illustrate that the US is leading a protracted battle of “high-tech suppression” against China.

Although companies such as Tencent and Beijing ByteDance have made some tech breakthroughs, they are based on US chip technology, the op-ed argues.

“The foundation of the entire industry is still in Americans’ hands. For now at least. China must leap from zero to one to provide solid support for the country’s competition with the US,” the author wrote.

The Global Times is a tabloid published by the People’s Daily, the official newspaper of China’s ruling Communist Party, but does not speak on behalf of the party and government, unlike its parent publication.

© Thomson Reuters 2020

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Arm-Nvidia Deal: Britain Assessing Impact of Sale, Minister Says

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By Reuters | Updated: 22 September 2020

Britain is assessing the impact of the sale of chip designer Arm to US company Nvidia, including commitments to keep its head office and staff in Cambridge, Eastern England, digital minister Caroline Dinenage said.

“We are currently working very hard to understand the full impact of this move and what potential impact it may have on the future, and from there we are able to consider what steps we may wish to take,” she told lawmakers early on Tuesday.

Nvidia, the biggest US chip company by market capitalisation, has agreed to buy Arm from Japan’s SoftBank for $40 billion (roughly Rs. 2,93,572 crores).

Dinenage said ministers would consider commitments made by SoftBank and Nvidia to maintain Arm as a successful British business “incredibly carefully”, and the government had already had discussions with the parties involved.

The decision whether to intervene in the deal would be taken by the secretary of state for digital, culture, media and sport after considering the relevant information, she said.

Arm, the leading tech company in Britain, lost its independence in 2016 when it was sold to SoftBank after the Japanese conglomerate pledged to retain the company’s headquarters in Cambridge, England, and increase jobs.

Nvidia’s CEO Jensen Huang has made similar commitments.

Arm’s energy-efficient architecture underpins processors made by Apple, Samsung, Qualcomm and others, making the technology ubiquitous in smartphones as well as present in a host of other devices.

© Thomson Reuters 2020

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SMIC Asks for US Approval to Continue Supplying Huawei: Report

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By Reuters | Updated: 16 September 2020

China’s Semiconductor Manufacturing International Corp (SMIC) has asked for approval from the United States to continue supplying Huawei, state media outlet Beijing News reported on Tuesday, citing the company.

The company told the newspaper that it had, in accordance with regulations, it applied in the United States to continue supplying Huawei, and reiterated that it will abide by relevant laws and regulations in all countries and regions.

SMIC did not immediately respond to a request for comment from Reuters.

The restrictions imposed by Washington in May on Huawei barring major semiconductor equipment vendors from supplying or service Huawei go into effect on Tuesday.

Companies hoping to continue doing business with the smartphone maker must now first receive a licence from Washington.

Taiwan Semiconductor Manufacturing, the most important manufacturer for Huawei’s high end mobile phone chipsets, said in July it would cease supplying Huawei come the deadline.

Micron, a maker of DRAM memory chips, also said it will no longer supply Huawei. Taiwanese chip designer MediaTek said last month it had applied for US permission to continue supplying Huawei.

Huawei is a major customer for SMIC and generates 20 percent of the foundry’s revenue, according to an analysis from Bernstein research.

The foundry is incapable of producing the most advanced chips in Huawei’s Kirin mobile chipsets, however, and still relies of equipment from US companies who may also cease servicing Huawei as the restrictions take effect.

SMIC itself has fallen under scrutiny from Washington. Earlier this month Reuters reported that the Trump administration is considering placing restrictions on the company similar to those it placed on Huawei, barring US companies from servicing and supplying it.

© Thomson Reuters 2020

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China Tech Veterans to Launch ‘Domestic Replacement’ Fund Amid US Sanctions

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By Reuters | Updated: 8 September 2020

Chinese tech veterans, including former executives at Huawei and SMIC, are planning to launch a “domestic replacement” fund by the end of the year to help create China’s next tech giant and support Chinese companies sanctioned by Washington.

Venture capital firm China Europe Capital aims to raise CNY 5 billion (roughly Rs. 5,399 crores) for the fund which will invest in start-ups specialising in technologies including semiconductor, 5G and artificial intelligence, said Zhang Jun, the firm’s chairman and a former vice president at telecom equipment maker Huawei.

The fund launch comes amid a government-backed investment boom in China’s technology sector as Beijing competes with Washington in an increasingly acrimonious “tech war”.

Relations between the world’s two largest economies have nosedived in recent months as they butt heads over the coronavirus pandemic, Hong Kong and trade.

“China and the US are in a Great Power rivalry that will end only when there’s a knockout,” Zhang told Reuters in an interview.

“It’s not just about trade war, or sanctions. It’s a matter of life and death.”

Huawei, drone producer DJI and video surveillance company Hikvision are among a growing list of Chinese companies sanctioned by US President Donald Trump’s administration.

On Friday, Reuters reported that Washington might blacklist China’s biggest chipmaker SMIC, or Semiconductor Manufacturing International.

Zhang sees opportunities in the current crisis, betting the Sino-US decoupling will foster a self-sufficient home-grown tech sector that can one day live without incumbent US champions such as Qualcomm and Intel.

There is skepticism among analysts, however, over how successful China can be should it get cut off from Western supply chains given it still has a long way to go to become self-sufficient in technology.

“More and more Chinese companies are being sanctioned by the US, and what we do, is to provide them with spare tyres…so that those cut off from US supplies can survive, and run, although with a limp,” said Zhang, who also sits on a panel of experts at China’s Ministry of Industry and Information Technology.

The new fund also aims to foster Chinese tech champions, capitalising on the expertise of a management team that also includes Joseph Xie, a founding member of SMIC, and Li Zhengyu, a former executive at Foxconn, Zhang said.

“We hope to find the next Huawei, the next DJI, or the next BYD,” he said, referring to electric car maker BYD.

China Europe Capital is backed by investment groups including New Margin Capital, CSC Group and Cybernaut, and aims to launch the “domestic replacement” fund in partnership with local governments.

© Thomson Reuters 2020

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US Military Sticks With Microsoft for $10-Billion JEDI Cloud Computing Contract Despite Amazon Claims

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By Agence France-Presse | Updated: 7 September 2020

The US Department of Defense said Friday it is sticking with its decision to award a $10 billion (roughly Rs. 73,480 crores) cloud computing contract to Microsoft, despite Amazon’s claims that President Donald Trump improperly influenced the process.

After a second look at proposals for the “JEDI” cloud computing contract, the Pentagon concluded anew that Microsoft is the preferred choice.

“Microsoft’s proposal continues to represent the best value to the Government,” the department said in a statement, adding it is “eager to begin delivering this capability to our men and women in uniform.”

However, the contract can’t move forward yet due to a federal court’s order putting it on hold while Amazon pursues a lawsuit over how the bidding was handled, the Pentagon noted.

“We appreciate that after careful review, the DoD confirmed that we offered the right technology and the best value,” Microsoft said.

“We’re ready to get to work and make sure that those who serve our country have access to this much needed technology.”

The 10-year Joint Enterprise Defense Infrastructure (JEDI) program will ultimately see all military branches sharing information in a cloud-based system boosted by artificial intelligence.

Amazon has alleged it was shut out of the deal because of Trump’s vendetta against the company and its chief executive Jeff Bezos.

The entrepreneur, who also owns The Washington Post, is a frequent target of the US president, who claims the newspaper is biased against him.

Amazon is seeking testimony from Trump and other top officials on the reasons for awarding the lucrative deal to Microsoft.

Amazon contended in a blog post that the DoD’s re-evaluation of bids was a “do-over” to let Microsoft fix a flawed proposal so US officials could “validate a flawed, biased, and politically corrupted decision.”

“There is a recurring pattern to the way President Trump behaves when he’s called out for doing something egregious: first he denies doing it, then he looks for ways to push it off to the side, to distract attention from it and delay efforts to investigate it,” Amazon said in the post.

“And then he ends up doubling down on the egregious act anyway.”

Amazon was considered the lead contender to provide technology for JEDI, with Amazon Web Services dominating the cloud computing arena and the company already providing classified servers for other government agencies including the CIA.

Amazon argued in court documents that the Pentagon’s choice of Microsoft was mystifying if not for Trump’s repeated “expressed determination to, in the words of the president himself, ‘screw Amazon.'”

The protest filed in the US Court of Federal Claims urges that the rival JEDI bids be re-evaluated.

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Dell’s Quarterly Results Beat Estimates on Remote Work Boost

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By Reuters | Updated: 28 August 2020

Dell on Thursday posted a smaller-than-expected drop in quarterly revenue and beat profit estimates on robust demand for its notebooks and software products for remote work and online learning.

Shares of the company were up two percent in trading after the bell.

The COVID-19 pandemic has led to a rapid shift to cloud, spurring demand for products that allow organizations to carry on, even as millions of people around the globe work from home to stay safe, and schools to hold virtual classes.

Orders for Dell from the education sector jumped 24 percent in the second quarter ended July 31, and government orders rose 16 percent.

The company also saw an uptick in demand for its gaming systems, including Alienware as more people turned to gaming during stay-at-home orders.

Revenue from the company’s biggest segment that includes desktop PCs, notebooks and tablets fell 4.6 percent to $11.20 billion (roughly Rs. 82,146 crores), and data center sales dropped 4.8 percent to $8.21 billion (roughly Rs. 60,206 crores) as companies directed their spending towards remote work, Dell said.

Its software unit VMware, which has directly benefited from the shift to cloud, posted a 9.7 percent rise in revenue to $2.91 billion (roughly Rs. 21,357 crores). Dell said in July it was planning to spin off its 81 percent stake in the unit.

The company’s total revenue slid 2.7 percent to $22.73 billion (roughly Rs. 166,826 crores) from a year earlier, but edged past analysts’ average estimate of $22.52 billion (roughly Rs. 165,285 crores), according to IBES data from Refinitiv.

Excluding items, Dell earned $1.92 (roughly Rs. 140) per share, beating estimates of $1.40 (roughly Rs. 103) per share.

Net income fell to about $1.10 billion (roughly Rs. 8,066 crores), or $1.37 (roughly Rs. 100) per share, from $4.23 billion (roughly Rs. 31,017 crores), or $4.47 (roughly Rs. 327) per share.

© Thomson Reuters 2020

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